‘WHT levy based on invoice price’ PAMA voices its concern over budget proposal

KARACHI: Local auto assemblers have expressed concerns over a budget proposal for the fiscal year 2023-24, which suggests charging the Withholding Tax (WHT) based on invoice price rather than engine capacity.

Industry representatives argue that this change would have a detrimental effect on an already troubled auto sector, leading to a decline in sales.

The Pakistan Automotive Manufacturers Association (PAMA) conveyed its objections to the Chairman of the Federal Board of Revenue (FBR) through a letter. Currently, the withholding tax is imposed on the engine capacity of automobiles under Section 231B of the income tax ordinance. This system allows both filer and non-filer buyers to know the exact amount of tax applicable to their vehicle purchase.

PAMA however said that the proposal to levy the WHT based on the invoice price instead of the engine capacity is reportedly under consideration for the upcoming budget.

PAMA argued against this proposal, stating that it would significantly increase the amount of withholding tax, leading to higher sale prices and ultimately impacting sales. The association urged the FBR to reduce the current engine-based WHT to support the struggling auto industry.

PAMA also emphasized that altering the long-standing practice of levying WHT based on engine capacity in favor of invoice price would not only negatively affect sales but also undermine the simplicity and convenience of the tax structure.

The association strongly recommended maintaining or further reducing the existing withholding tax structure under Section 231B.

The letter from PAMA warned that any further increase in the tax amount would severely impact an industry that already pays over 40% per unit tax. The auto sector has faced numerous challenges, and the proposal could exacerbate the hardships faced by manufacturers and dealers.

Meanwhile, Pak Suzuki Motor Co. Ltd (PSMCL) reached out to Prime Minister Shahbaz Sharif in a separate letter, highlighting the dire situation the company is currently facing.

The letter stated that Pak Suzuki is experiencing one of the worst periods in its 40-year history in Pakistan, having incurred substantial losses of Rs. 12.9 billion in the first quarter of the current year due to economic uncertainties.

The company is also implementing frequent “No Production Days” throughout the year, while its dealers and vendors are also struggling, with some already closing down and others on the verge of collapse.

In light of these circumstances, Pak Suzuki requested the Prime Minister to refrain from imposing any new duties and taxes in the upcoming federal budget, particularly for vehicles up to 1000cc.

The concerns expressed by the Pakistan Automotive Manufacturers Association and Pak Suzuki Motor Co. Ltd highlight the need for careful consideration of the budget proposal’s potential impacts on the auto industry.

Copyright Business Recorder, 2023